IEA (2019), Tracking Power, IEA, Paris https://www.iea.org/reports/tracking-power-2019
Of all energy sources in the electricity sector, renewables had the highest rate of generation growth in 2018. Renewables-based electricity generation increased by 7% (almost 436 TWh) – larger than Canada's entire renewable electricity production, and faster than the 6% average annual growth since 2010.
Solar PV, hydropower and wind each accounted for less than one third of 2018 total electricity generation growth, with bioenergy representing most of the rest. Taken together, renewables fuelled more than 48% of the world's increase in electricity generation, and they now account for more than 25% of global electricity output, second after coal.
Renewable power overall needs to sustain annual growth of 7% over 2019-30 to meet the SDS level. This will require faster deployment of all renewable technologies including hydropower, which represented 65% of global renewable generation in 2018, but on the contrary, the rate of annual renewable capacity additions did not rise last year.
Solar PV is still on track with the SDS, with generation increasing by almost 32% in 2018 thanks to continuous policy support and cost reductions. In addition, the tracking status for bioenergy was upgraded from "needs improvement" to "on track". Several policy and market developments in China contributed significantly to this status change.
For all renewable power technologies, the long-term stability of targets and policies is essential to ensure investor confidence and continued growth. At the same time, policies need to continuously adapt to changing market conditions to achieve greater cost-competitiveness and improve integration of renewables into the system.
Different policy instruments have been used to support renewable electricity deployment through different stages of technological maturity. Options include administratively set feed-in tariffs or premiums, renewable portfolio standards, quotas and tradeable green certificate schemes, net metering, tax rebates and capital grants. Some of these instruments have been introduced in parallel.
Recently, auctions (for centralised, competitive procurement of renewables) have become increasingly widespread and have been instrumental in discovering renewable energy prices and containing policy costs in many countries, especially for solar PV and wind.
However, the success of such policies in achieving deployment and development objectives relies on their design and ability to attract investment and competition.
Distributed solar PV expansion, driven by rapid cost reductions and policy support, is transforming electricity markets. The rapid adoption of residential, commercial and industrial PV systems is blurring the roles of electricity producers and consumers in many countries. This trend deserves careful attention from policy makers.
Currently, some distributed solar PV policies – such as buy-all, sell-all and annual net metering with retail-price remuneration – can have undesired effects in the long term. Unmanaged rapid growth of distributed PV can disrupt electricity markets by raising system costs, challenging the grid integration of renewables and reducing the revenues of distribution network operators.
Sustainable distributed PV deployment therefore depends on sound market design as well as policy and regulatory frameworks that balance the opposing interests of distributed PV investors, system operators, distribution companies and other (non-PV) electricity consumers. Tariff reforms and appropriate policies will be needed to attract investment in distributed solar PV while also securing enough revenues to pay for fixed network assets and ensuring that the cost burden is allocated fairly among all consumers.
Increasingly competitive, renewables – especially solar PV and wind – are rapidly transforming power systems worldwide. However, reforms to market design and policy frameworks will be needed to ensure investment at scale both in new renewable capacities and in power system flexibility to integrate high shares of variable renewables in a reliable and cost-effective manner.
As variable renewable energy shares increase, policies ensuring investment in all forms of flexibility become crucial.
These include, for example, policies and measures to:
- enhance power plant flexibility by improving operations of the existing conventional fleet
- unlock demand-side management, for example by allowing the participation of pools of consumers in the system services market
- support energy storage
- improve and enhance grid infrastructure
Some renewable technologies are still relatively expensive and/or face specific technology and market challenges, so require more targeted policies.
These policies could address:
- better remuneration of the market value of storage for concentrating solar power (CSP) and pumped-storage technologies
- timely grid connection and continued implementation of policies that spur competition to achieve further cost reductions for offshore wind
- improved policies to tackle pre-development risks for geothermal energy
- larger demonstration projects for ocean technologies
Other policy actions are needed to reflect the multiple benefits of bioenergy for electricity, including rural development, waste management and dispatchability.
As the transport, heating and cooling, and power sectors become increasingly interdependent, cross-linked decision making and policies designed to be beneficial across sectors will be crucial.
For example, the success of electric vehicle (EV) deployment will depend critically on the strengthening of electricity distribution networks and smart charging systems at the local level.
Solar PV remains on track with the SDS, with generation increasing by over 30% in 2018 thanks to continued policy support and cost reductions. Bioenergy for power is also on track, with recent policy and market developments indicating accelerated deployment in coming years.
The tracking status of onshore wind, offshore wind and hydropower remains unchanged as "more efforts needed", while concentrating solar power, geothermal and ocean power remain well below the growth rates necessary to meet clean energy goals.